I called Bobek AG’s Opinion in C-337/17 ‘solid’ – by which I also implied: convincing.  Is the actio pauliana by a Polish company against a Spanish company, which had bought immovable property from the former’s contracting party, one relating to ‘contract’ within the meaning of Article 7(1) Brussels I Recast?

Bobek AG Opined it is not. The CJEU today held it is. I disagree.

Firstly, the second chamber, at 29 ff, repeats the inaccurate references in Valach and Tunkers, that (at 30) ‘actions which fall outside the scope of [the Insolvency Regulation] fall within the scope of [Brussels I Recast].’ This oft repeated quote suggest dovetailing between the two Regulations, a view which is patently incorrect: readers can use the tag ‘dovetail’ or ‘arrangement’ (for ‘scheme of arrangement’) for my view on same; see e.g. Agrokor.

Having held (this was not seriously in doubt) that Brussels I Recast is engaged, the Court then takes a much wider view of the Handte formula than advocated by Bobek AG. The Court at 37 refers to Granarolo, merely in fact to emphasise the requirement of strict interpretation of the jurisdictional rules which vary Article 4’s actor sequitur forum rei’s rule. At 43 follows the core of its reasoning: ‘By [the pauliana] the creditor seeks a declaration that the transfer of assets by the debtor to a third party has caused detriment to the creditor’s rights deriving from the binding nature of the contract and which correspond with the obligations freely consented to by the debtor. The cause of this action therefore lies essentially in the breach of these obligations towards the creditor to which the debtor agreed.’

The Court does not refer to Ergo, let alone to Sharpston AG’s ‘centre of gravity’ test in same, however it would seem that this may have influenced it. Yet in my view this is way too extensive a stretch of the Handte or Sharpston AG’s Ergo formula. Litigation in the pauliana pitches the creditor against the third party. It would take really quite specific circumstances for Handte to be met in the relation between these two. That a contractual relation features somewhere in the factual matrix is almost always true.

For a comparative benchmark, reference can be made to Refcomp where the Court took a very limiting view on subrogration of choice of court.

The Court’s formulation at 45 is entirely circular: were the creditor not able to sue in the forum contractus, ‘the creditor would be forced to bring proceedings before the court of the place where the defendant is domiciled, that forum, as prescribed by Article 4(1) of Regulation No 1215/2012, possibly having no link to the place of performance of the obligations of the debtor with regard to his creditor.’ Indeed: because the pauliana does not mordicus have to links to that place; it is not because it might not, that a forum contractus has to be conjured up to secure these links.

The Court then quite forcefully and seemingly without much hesitation identifies a specific forum contractus (unlike the AG who had suggested that that very difficulty supports his view that there simply is no forum contractus to speak of): at 46: ‘the action brought by the creditor aims to preserve its interests in the performance of the obligations derived from the contract concerning construction works, it follows that ‘the place of performance of the obligation in question’ is, according to Article 7(1)(b) of this regulation, the place where, under the contract, the construction services were provided, namely Poland.’

The initial contractual obligation between creditor and debtor therefore creates crucial jurisdictional consequences vis-a-vis third parties whose appearance in the factual matrix presents itself only very downstream. That, I would suggest, does not at all serve the predictability which the Chamber (rightly) emphasises at the very outset of its judgment as being the driving principle behind its interpretation.

I am not convinced by this judgment. (And yes, I am being polite).

Geert.

Is the actio pauliana by a Polish company against a Spanish company, which had bought immovable property from the former’s contracting party, one relating to ‘contract’ within the meaning of Article 7(1) Brussels I Recast?

Bobek AG Opined in C-337/17 Feniks v Azteca on 21 June. His Opinion features among others a legal history class on the action pauliana, and eventually a justifiable conclusion: the action is not one in contract. In C-115/88 Reichert I the Court held that the French civil law actio pauliana does not fall within exclusive jurisdiction concerning rights in rem in immovable property (Article 24(1). Soon afterwards, the Court added in C-261/90 Reichert II that the same actio pauliana was neither a provisional measure nor an action bringing proceedings concerned with the enforcement of a judgment. It was also not a matter relating to tort, delict or quasi-delict.

That left only the potential for a forum contractus to be decided.

The AG reviews a number of arguments to come to his decision. One of those I find particularly convincing: at 62: assuming that the applicability of the head of jurisdiction for matters relating to a contract were to be contemplated, the question that immediately arises is which of the two contracts potentially involved should be taken as relevant? To which of the two contracts would an actio pauliana in fact relate? Among others (at 69-70) Sharpston AG’s Opinion in Ergo is discussed in this respect and the AG in my view is right when he dismisses the contractual relations at issue as an anchor point.

At 69 the AG also adds a knock-out point which could logically have come at the very beginning of the Opinion:

‘it should also be added and underlined that both approaches outlined above fail to satisfy the requirement of ‘obligation freely assumed by one party towards another’, [the AG refers to Handte, GAVC] that is by the Defendant towards the Applicant. Even if the case-law of this Court does not require that there is identity between the parties to the proceeding and to the respective contract, it appears difficult to consider that the mere filing of an actio pauliana creates a substantive-law relationship between the Applicant and the Defendant resulting from, for example, some kind of legal subrogation founded by an act of COLISEUM (as the Applicant’s initial debtor).’

Readers further may want to take note of para 92: the AG’s view to treat the power of recitals with caution. The AG ends at 97-98 with a robust defence of the Brussels regime, with specific reference to the common law (footnotes omitted):

‘What has to be sought is a principled answer that applies largely independently of the factual elements in an individual case. While fully acknowledging and commending the attractive flexibility of rules such as forum(non) conveniens that allow for derogation in the light of the facts of a specific case, the fact remains that the structure and the logic of the Brussels Convention and Regulations is indeed built on different premises. What is understandably needed in a diverse legal space composed of 28 legal orders are ex ante reasonably foreseeable, and thus perhaps somewhat inflexible rules at times, and less of an ex post facto explanation (mostly as to why one declared oneself competent) heavily dependent on a range of factual elements.

All in all, in the current state of EU law, actio pauliana seems to be one of the rare examples that only allows for the applicability of the general rule and an equally rare confirmation of the fact that ‘… there is no obvious foundation for the idea that there should always or even often be an alternative to the courts of the defendant’s domicile’. ‘

A solid opinion with extra reading for the summer season (on the Pauliana).

Geert.